The country's booming economy and the airport's strategic
location as a hub for connecting flights to locations throughout
the Americas are fueling Copa's own rise.

Copa's revenue is expected to rise 15% this year to $2.6
billion, double what it was five years ago.

"The Panamanian economy continues to be a very important
driver of the company's growth," said Citigroup analyst Stephen
Trent.

The International Monetary Fund projects Panama's GDP will
grow 9% this year.

Last year's route-building programs and technology upgrades
kept Copa's profit in check with single-digit growth but earnings
are expected to take off this year, climbing 30% to $9.81 a
share.

Though Copa recently began new service to Boston and Tampa,
most of its expansion this year will come from adding more
frequent flights on existing routes. That means fewer start-up
costs.

New Routes

Last year, it launched several new routes, which came with
added costs that cut into profits.

From its centrally located Western Hemisphere hub in Panama
City, Copa provides numerous connections to principal markets in
North, Central and South America and the Caribbean. In the U.S.,
it now flies to nine cities including Miami, Orlando, New York
and Los Angeles.

Many of its feeder routes into Panama City, particularly from
Central America and the Caribbean, don't typically generate
enough demand to justify point-to-point service.

Trent says that Copa transports 20 or fewer passengers on 74%
of its routes.

That might sound like it's not worth the trouble. But
profitability on those "thin routes" is "big time," Trent
says.

Copa charges more than rivals on many of its flights because
it saves passengers travel time by connecting them to their final
destinations through Panama City rather than other hubs farther
away.

"To go from Guatemala City to Maracaibo in Venezuela you can
either transfer in Panama City or Bogota, Colombia. If you fly
through Bogota it's 11 hours instead of eight hours through
Panama City," Trent said.

Business travelers would rather pay more for the shorter trip
on Copa, he says.

In a survey looking at four low-density routes in Central and
South America late last year, he found that Copa passengers'
average trip lasted half that of competitors. The four sampled
trips required at least one stop.

Because of the shorter flight times, Copa burns less fuel than
the competition on the same route.

"One of the reasons it does well is that it has the best and
most centrally located hub. And it flies the shortest distance
and charges the highest fare," Trent says.

About 45% of Copa's passengers are business travelers, a
higher percent than most airlines.

Far from being a low-fare carrier, Copa is more similar to
traditional hub-and-spoke carriers in the U.S.

"Spokes on the hub attract new customers rather than low
fares," said analyst Bob McAdoo of Imperial Capital. "They don't
have to attract new customers by cutting fares. That is different
from the rest of the aviation world."

Copa competes with a number of other airlines such as theLatam
Airlines Group (
LFL
) (Lan Airlines), Avianca, AeroMexico, American Airlines andDelta
Airlines (
DAL
).

But in many of its markets, Copa has little or no competition,
McAdoo says.

And its Panama City hub, he adds, is unmatched in that part of
the world, and likely will be for some time due to facility and
land limitations elsewhere.

"There is no other hub like that in Latin America so they have
a monopoly in bringing in smaller and midsize cities into their
hub," McAdoo said.

In June, Copa said its systemwide passenger traffic rose 19.5%
over the prior year's same month while capacity grew 14.4%. The
load factor was 76.7%, a 3.5 point increase over last year.

Combining figures from April through June, Trent figures that
Copa's consolidated revenue per passenger mile for the second
quarter grew 20.4% over the prior year.

Second-quarter results will be reported on Aug. 7. Analysts
expect earnings to soar 33% over last year to $1.75 a share. Fuel
prices are expected to be "tame," Trent says.

Analysts see second-quarter revenue rising 15% to $594
million.

Colombian Operation

Copa continues to shrink its Colombian domestic airline
operation in favor of more profitable international routes.
Domestic capacity on Copa Airlines Colombia accounted for 3.4% of
Copa's total capacity in June, down from the high teens a few
years ago.

Copa had acquired Colombia's second-largest air carrier,
AeroRepublica, in 2005, later renaming it Copa Airlines
Colombia.

The Colombian carrier flies to 10 cities within Colombia as
well as to several cities outside the country, including Copa's
Panama City hub.

Copa's fleet consists of nearly 90 planes, most of them
relatively new Boeing 737 next-generation models and smaller
Embraer-190 aircraft.

"It's a modern fleet, one of the youngest (in the industry),"
Trent said.

Copa expects to take delivery of another 10 within two
years.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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